This second chart looks at the burden of government debt, which averaged 45 percent of GDP for the 1965-1969 period. And we see a stick figure wondering whether the debt for 2006-2010 will be higher or lower. In other words, did politicians use the additional revenue to pay down the debt, did they spend it, or did they spend all the added revenue and then borrowed even more?
Well, knock me over with a feather. The next chart shows that debt is much higher today, averaging about 60 percent of GDP.
In other words, every penny of new tax revenue got spent. Not only that, but Europe’s politicians accumulated even more red ink because they increased spending even faster than they increased revenue.
What’s the moral of this story? Well, President Obama claims his class-warfare tax policy will reduce deficits as part of a “balanced approach.”
But what he’s actually proposing is that the United States should emulate our friends on the other side of the Atlantic. And it seems their idea of a “balanced approach” simply means higher taxes, as you can see from this shocking chart. Gee, what a coincidence.
Based on what we know about the evidence in Europe, and based on what we know about the proclivities of American politicians, anybody want to guess what will happen to U.S. government debt if Obama prevails?
P.S. The pre-2004-expansion European Union nations were Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Netherlands, Portugal, Spain, Sweden, and the United Kingdom.
P.P.S. The figures in this post are for central government taxes and debt.
P.P.P.S. There are some good lessons to be learned from other nations, as shown in this video. And if you pay attention to the details in that video, you’ll notice that the key to good fiscal policy is…drumroll please…following Mitchell’s Golden Rule.